Archive for September, 2008

How do I know whether a Hong Kong shelf / pre-formed company is “safe” or not?

A shelf / pre-formed company is a company that has already been incorporated but has not conducted any business. Sometime people want to buy shelf companies because:

it takes about 3 working days to transfer a shelf company, while it takes up to six working days to form a brand new company;

transferring a shelf company does not require a witness, while forming a new company does;

there is no incorporation failure (such as name collision) because the company has already been formed;

there is no need to come up with a name.

Since a shelf company has already been formed before purchase, it is important to ensure the company does not have any liability. To ensure the company is “safe”:

For shelf companies incorporated before July 16, 2008:

There should be no director registered with the Companies Registry. Since there is no director, the companies are not operational;

A letters issued by the subscriber indicating the company has not incurred any liability.

For shelf companies incorporated on or after July 16, 2008:

Beginning on July 11, 2008, the Companies Registry requires the appointments of first directors at the time of incorporation, therefore, all shelf companies registered on or after July 16, 2008 have directors and are operational right after incorporation. Because of that, the letters, issued by the founders indicating that the companies have not incurred any liability, are the only proof and protection for the purchasers.

Since the “safety” of the shelf companies is not evidenced in the Companies Registry, one should purchase shelf companies from reliable sources, or simply form brand new companies.